This week brings both a celebration of freedom from bondage and the beginning of summer. The word solstice literally means to stand still, reminding all of us to pause to consider hard-won freedoms and our obligations to promote justice. To all our readers, we wish you a happy Juneteenth and a happy summer.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Gonzalez v. UBS Fin. Servs., No. 19-01086-WGY, 2023 WL 3952983 (D.P.R. Jun. 12, 2023) (Judge William G. Young). The question before the court here was whether an ERISA plan participant can be compelled to arbitrate an ERISA claim for breach of fiduciary duty brought on behalf of the plan when the plan, but not the participant, signed an arbitration agreement. Echoing First Circuit and Supreme Court language, the court here held that arbitration is not a matter of coercion and concluded that plaintiff Francisco Gonzalez was not bound to arbitration in this instance. Adopting the stance of defendant UBS Financial Services would have the absurd effect, the court held, of “dragging along beneficiaries, participants…perhaps even the Secretary, into arbitration agreements of which they were unaware.” Because Mr. Gonzalez, and the other plan participants and beneficiaries of the Fund, did not enter into an arbitration agreement themselves, the court concluded that Mr. Gonzalez, who is independently statutorily entitled to sue, is not bound to arbitrate his claims, even though the relief if any would inure to the fund. Nor was Mr. Gonzalez bound to arbitrate under an estoppel theory. Overall, the court emphasized that “[a]rbitration is a voluntary process, and often an unfair process to relatively unsophisticated consumers.” If UBS wished to arbitrate with ERISA beneficiaries, the court wrote that “it needed to do so by contractual agreement, it did not do so here.” For these reasons, the court denied UBS’s motion to compel arbitration as well as its motion for summary judgment.
Breach of Fiduciary Duty
Ravarino v. Voya Fin., No. 3:21-CV-1658 (OAW), 2023 WL 3981280 (D. Conn. Jun. 13, 2023) (Judge Omar A. Williams). Participants of the Voya 401(k) Saving Plan claim in this action that Voya Financial, Inc. and its wholly owned corporate companies have improperly managed the plan by including proprietary investment options to the benefit of the Voya defendants and the detriment of the investing employees. The participants argued that defendants failed to implement a prudent and loyal process for controlling plan costs and that they failed to select appropriate and well-performing investment options. Instead, plaintiffs maintain that defendants engaged in prohibited transactions and violated Section 1106(b) by dealing with plan assets in a way that personally benefited the Voya companies. Defendants moved to dismiss the entirety of plaintiffs’ action. Their motion was mostly granted in this decision. With regard to all but one of the challenged investment options, the court concluded that plaintiffs could not state a valid breach of fiduciary duty claim because they lacked adequate long-term comparisons to demonstrate imprudent costs and underperformance. However, the court allowed plaintiffs to proceed with their fiduciary breach claims relating to the Voya Small Cap Growth Trust Fund because it was added to the plan after it already had a significant history of underperformance and because the fund retained the investment option even after a “mass exodus of investors from the fund in 2019.” The court therefore found that plaintiffs stated their breach of fiduciary duty claim with regard to this one challenged option, as well as derivative claims of failure to monitor and co-fiduciary liability as they pertained to this fund. In addition, the court found that plaintiffs stated a claim for prohibited transactions with other parties-in-interest for their own benefit against all defendants. Nevertheless, the remainder of plaintiffs’ causes of action, the majority of their complaint, was dismissed. In general, the court agreed with defendants that plaintiffs’ complaint could not be read to infer most of the wrongdoing alleged.
Anderson v. Advance Publications, Inc., No. 22 Civ. 6826 (AT), 2023 WL 3976411 (S.D.N.Y. Jun. 13, 2023) (Judge Analisa Torres). Former plan participant Jermaine Anderson, individually and on behalf of the Advance 401(k) Plan and a putative class of similarly situated individuals, brought this action against Advance Publications, Inc. alleging that it breached its fiduciary duties under ERISA by selecting and maintaining a suite of ten BlackRock LifePath Target Date Funds despite their significant underperformance when compared to mutual fund alternatives and the broader target date fund marketplace. Advance Publications moved to dismiss the complaint for failure to state a claim. The court granted the motion, and dismissed the entire action, although it did so without prejudice. Plaintiff’s allegations of an imprudent monitoring process, and the comparators he selected to demonstrate the underperformance, were found by the court to be insufficient, conclusory, and speculative. Applying Twombly, the court stated that it could not infer any of the mismanagement alleged, even reading the complaint in the light most favorably to Mr. Anderson. However, because the court found that the deficiencies it identified could potentially be cured through amendment, the court permitted Mr. Anderson to amend his complaint should he wish to do so.
Sweet v. Advance Stores Co., No. 7:21-cv-549, 2023 WL 3959779 (W.D. Va. Jun. 9, 2023) (Judge Michael F. Urbanski). Five named plaintiffs, on behalf of themselves, the Advance Auto Parts, Inc. 401(k) Plan, and a class of similarly situated plan participants and beneficiaries, brought this suit against the plan’s fiduciaries pursuant to Sections 409 and 502 of ERISA for breaches of fiduciary duties of prudence and loyalty for failure to control plan costs and to ensure investment options performed adequately. Plaintiffs moved to certify the class. The court granted their motion and certified the class in this order. The court was satisfied that all the prerequisites of Rule 23(a) were met, as the class has over 22,000 participants, there are common questions of fact as to the defendants’ conduct overseeing and managing the plan, the named plaintiffs are typical of the other class members, and the named plaintiffs and their counsel are adequate and qualified representatives to represent the class. Furthermore, the court held that certification under Rule 23(b)(1) was appropriate, as is typically the case for similar breach of fiduciary duty class actions brought under Section 502(a) of ERISA.
Disability Benefit Claims
Mucciacciaro v. Hartford Life & Accident Ins. Co., No. 22-01503, 2023 WL 4014278 (D.N.J. Jun. 15, 2023) (Judge Christine P. O’Hearn). Plaintiff Sandra Mucciacciaro’s claim for long-term disability benefits was denied by Hartford Life and Accident Insurance Company based solely on the fact that up until the point when she submitted her claim she was working full-time and therefore was performing the essential functions of her job as a dental hygienist. Ms. Mucciacciaro attempted to convince Hartford that she had been working full-time despite the significant challenges caused by her disabling back problems and that she had requested an accommodation from her employer which was ultimately denied. After Hartford upheld its denial during the internal appeals process, Ms. Mucciacciaro commenced this disability benefit action seeking a court order finding the denial of her claim arbitrary and capricious. In this decision ruling on the parties’ cross-motions for summary judgment, Ms. Mucciacciaro got just that. The court pointed out the flaws in Hartford’s logic underpinning its denial. “If Defendant could lawfully deny an employee’s disability claim simply because they are working full-time and thus per se not disabled then the employee would necessarily be forced to reduce their hours or leave employment to establish disability. Reducing hours or leaving could, however, have the effect of terminating the employee’s coverage…This is not a hypothetical or speculative result it is the exact circumstances in which Plaintiff’s [sic] found herself. If Defendant’s interpretation was correct, Plaintiff was presented with a catch-22: continue working full-time and never be able to prove herself disabled under the Policy or stop working and lose coverage. Under this theory, no employee could qualify for disability and that simply cannot be how the Policy is interpreted.” Accordingly, the court held that the denial on this basis was arbitrary and capricious, and therefore denied Hartford’s motion for judgment and granted judgment for Ms. Mucciacciaro. However, because Hartford never made a determination on Ms. Mucciacciaro’s claim based on a substantive analysis of her medical records, the court concluded that the proper course of action here was to remand for Hartford to perform that analysis.
Bulas v. Unum Life Ins. Co. of Am., No. 2:22-cv-112, 2023 WL 3951214 (S.D. Ohio Jun. 12, 2023) (Judge Sarah D. Morrison). Interventional and diagnostic radiologist Dr. Robert Bulas applied for and began receiving total disability benefits in 2017 after he experienced a sudden loss of vision in his right eye. For four years defendant Provident Life and Accident Insurance Company paid Dr. Bulas benefits. In fact, during a 2019 review of Dr. Bulas’ file, Provident determined that the likelihood Dr. Bulas could return to work in his occupation “seems poor even with surgery.” Dr. Bulas did undergo several eye surgeries, the last of which, in 2021, improved his condition somewhat. Based on this modest improvement, Provident terminated Dr. Bulas’ benefits, concluding he could return to his work performing diagnostic radiology. Dr. Bulas appealed. He argued that “there is a world of difference between being able to read an eye chart and being able to perform diagnostic radiology.” Dr. Bulas’ internal appeal of Provident’s decision was ultimately unsuccessful, prompting this ERISA civil action. The parties filed cross-motions for summary judgment under abuse of discretion review. In this decision the court concluded that the denial was arbitrary and capricious and granted summary judgment in favor of Dr. Bulas, reinstating his benefits. The court agreed with Dr. Bulas that Provident’s review was not “a deliberate and principled reasoning process,” and that it was operating under a conflict of interest which may have affected its decision-making. Also, the court stated that, “in addition to none of the four [medical reviewers] being independent, none of the four physicians examined Dr. Bulas in-person.” The totality of these factors led the court to agree with Dr. Bulas that the denial was improper.
Easter v. Hartford Life & Accident Ins. Co., No. 21-4106, __ F. App’x __, 2023 WL 3994383 (10th Cir. Jun. 14, 2023) (Before Circuit Judges Holmes, Phillips, and Carson). Plaintiff-appellant Audrey Easter stopped working as a social worker and applied for long-term disability benefits identifying chronic fatigue syndrome, obstructive sleep apnea, and hypersomnia as her disabling conditions. Hartford Life & Accident Insurance Company denied Ms. Easter’s claim for benefits. Upon review of her medical records, and interviews with her treating physicians, Hartford concluded that there was not enough evidence to support the existence of functional impairments due to her sleep disorders which were severe enough to prevent her from working in her sedentary occupation. In particular, Hartford latched onto a statement from one of Ms. Easter’s own treating physicians who stated that she believed Ms. Easter was able to perform a sedentary occupation. Ms. Easter appealed the denial. Hartford affirmed its conclusions on appeal, prompting Ms. Easter to bring her suit under ERISA. On cross-motions for summary judgment, the district court concluded that the appropriate standard of review was abuse of discretion given the plan’s language granting Hartford discretionary authority. The district court rejected Ms. Easter’s position that Hartford’s denial was procedurally flawed and that the court should therefore apply the procedural irregularities exception and trigger de novo review. Under deferential review, the district court found that Hartford’s denial of Ms. Easter’s claim was supported by substantial evidence and thus granted summary judgment in favor of Hartford. Ms. Easter appealed to the Tenth Circuit. In this decision, the Tenth Circuit affirmed the entirety of the district court’s conclusions. To begin, the court of appeals agreed with the lower court that there were not significant procedural irregularities to warrant changing the standard of review. Specifically, the appeals court found that Hartford consistently addressed Ms. Easter’s disabling conditions, that it did not need to inform her of what additional information would be needed to perfect her claim because no such information was required, and that Hartford properly addressed all of the evidence provided by Ms. Easter and adequately explained why it disagreed with the information in the record favorable to her. Having concluded that deferential review should not be disturbed due to any procedural claim-handling problems, the court of appeals turned to addressing Hartford’s decision. There it found that Hartford based its denial on a thorough and fair investigation of Ms. Easter’s claim and that its decision to deny the claim was reasonable given the medical records which substantially supported its position. For these reasons, the Tenth Circuit declined to disturb the district court’s ruling.
Bonomo v. Factory Mut. Ins. Co., No. 1:21-cv-11750-IT, 2023 WL 3934696 (D. Mass. Jun. 9, 2023) (Judge Indira Talwani). In this decision the court ruled on motions brought by both parties related to discovery matters in a lawsuit stemming from denials of ERISA severance benefits following a corporate merger. The discovery process had been underway for quite some time before this ruling. Originally, all discovery was scheduled to be completed by July 1, 2022. However, the court approved two joint motions to amend scheduling, eventually pushing back the discovery completion date to October 12, 2022. That date has now come and gone, with neither side satisfied by the other’s productions. In particular, the court found that three plaintiffs seriously disregarded their obligations to participate in discovery and timely produce requested documents. One of the plaintiffs responded very belatedly, and the other two failed to participate in discovery entirely, despite repeated promises from their counsel that their responses were forthcoming shortly. Plaintiffs appeared to provide no excuse or justification for their failure to comply. In response to the plaintiffs’ failure to engage in timely discovery under Federal Rules of Civil Procedure, defendant moved for court sanctions and sought to foreclose further discovery or modification to the scheduling order. The plaintiffs for their part moved to compel and moved to reopen discovery. The court began by addressing and granting defendant’s motion. First, the court deemed defendant’s requests for admission as to plaintiffs admitted per Rule 26(a)(3). The court also ruled that any objections made by plaintiffs in response to defendant’s production request were waived given their failure to timely respond. Turning to the request for sanctions, the court ordered plaintiffs to pay defendant nominal fees of $500, and ordered the two plaintiffs who never participated in discovery to produce affidavits showing cause why they should not be dismissed from this action. As for plaintiffs’ discovery motions, the court found that plaintiffs did not point to anything in the administrative record which establishes a good reason, like an obvious pattern of bias, to warrant supplementing discovery. Moreover, the court stated that plaintiffs “failed to offer any persuasive explanation for their failure to complete discovery within the previously established time frame.” Accordingly, both of plaintiffs’ discovery motions were denied.
Robinson v. Allstate, No. 22-6527 (MAS) (TJB), 2023 WL 3932852 (D.N.J. Jun. 9, 2023) (Judge Michael A. Shipp). Plaintiffs Linda Robinson, Michael Williams, and Zachary Williams sued Allstate, Allstate Retirement Plan, and Allstate 401(k) Savings Plan alleging four state law causes of action: breach of contract, breach of fiduciary duty, bad faith, and injunctive relief. The plaintiffs believe that defendants wrongfully paid or wrongfully intended to pay plan benefits to decedent Laverne Griffin’s ex-husband, contrary to a New Jersey state divorce decree in which the ex-husband waived all rights to Laverne’s accounts. Defendants moved to dismiss the action, arguing that the state law claims are preempted by ERISA. Plaintiffs missed the deadline to file a timely opposition to defendants’ motion to dismiss. Nevertheless, the court stated that it was required to evaluate the motion on the merits. It did so, and agreed with defendants that the state law causes of action are within the purview of ERISA preemption as they relate to ERISA-governed pension plans and the plans are a critical factor in establishing liability for each of the claims. Accordingly, the court agreed with defendants that plaintiffs’ claims are preempted by ERISA, and therefore granted the motion to dismiss.
Medical Benefit Claims
K.K. v. Premera Blue Cross, No. C21-1611-JCC, 2023 WL 3948236 (W.D. Wash. Jun. 12, 2023) (Judge John C. Coughenour). Mother and daughter K.K. and I.B. sued their self-funded ERISA welfare plan’s third-party administrator, Premera Blue Cross, for benefits under Section 502(a)(1)(B) and for equitable relief for an alleged violation for the Mental Health Parity and Addiction Equity Act, after Premera denied the family’s claim for I.B.’s one-year stay at a residential treatment center. The parties cross-moved for summary judgment, and Premera also moved to seal the administrative record. The court granted Premera’s motions and denied plaintiffs’ motion. To begin, the court concluded that the plan’s discretionary language requires abuse of discretion review of the denial. Meanwhile, the court expressed that it would apply de novo review of the Parity Act claim, as the Plan’s compliance with the Parity Act is a question of law. Plaintiffs argued that Premera wrongly denied I.B.’s claim for benefits for her residential treatment, and that it failed to engage in a meaningful dialogue with them. Premera responded that I.B.’s treatment was not medically necessary under the plan’s InterQual criteria because she lacked the required symptoms under the guidelines. Moreover, the InterQual criteria also require that extended stays at residential treatment facilities are only medically necessary if the provider performs weekly psychiatric evaluations, which did not happen here. Under deferential review, the court concluded that Premera had the stronger arguments. “[T]he Court cannot find that Premera’s decision…was illogical, implausible, or without support in inferences drawn from the record…Nor can the Court find that Premera’s communications with Plaintiffs failed to demonstrate the required meaningful dialogue. There was no shifting rationale. At each stage, Premera communicated a consistent basis for its decision.” Accordingly, the court granted summary judgment to Premera on plaintiffs’ benefit claim. It did so on plaintiffs’ Parity Act claim as well. The court focused in on the fact that the Parity Act requires only that plans apply the same processes and standards for both medical and behavioral health/mental health coverage, not that the “resulting treatment criteria be the same.” Based on this, the court held that plaintiffs could not meet their burden of proving unequal access to mental healthcare treatments, despite the fact the plan only applied the InterQual criteria to mental and behavioral healthcare claims and not to hospice care. Finally, although the request came from Premera and not I.B. herself, the court agreed to seal the administrative record because of the personal medical information contained within it.
Pleading Issues & Procedure
Huber v. IKORCC Pension Plan, No. 2:23-CV-71-JPK, 2023 WL 4015938 (N.D. Ind. Jun. 15, 2023) (Magistrate Judge Joshua P. Kolar). Pro se plaintiff Jeramie S. Huber filed this ERISA action against his pension plan, the Indiana Kentucky Ohio Regional Council of Carpenters Pension Plan, seeking a court order requiring the Plan to return his contributions. Mr. Huber alleged in his complaint that his contributions were “illegally invested” and that he requested certain documents from the Plan which the Plan failed to provide. The Plan moved to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The court granted the Plan’s motion to dismiss and dismissed the case without prejudice. Even viewing the complaint liberally and in the light most favorable to Mr. Huber, the court ultimately concluded that it did not satisfy notice pleading as the allegations were simply too vague and conclusory. For instance, the court found that Mr. Huber did not plead adequate facts to reasonably infer that he was denied some specific information or documents from the plan to which he was entitled. With regard to the allegedly illegal plan investments, the court wrote that the “complaint does not explain what investments he is referring to, or why they conflicted with the plan rules or the participants’ interests.” Without these types of necessary details, the court held that Mr. Huber had not stated any claim for which the court could provide relief.
Kristiansen v. Aldaoud, No. CV-22-01976-PHX-DJH, 2023 WL 4031964 (D. Ariz. Jun. 15, 2023) (Judge Diane J. Humetewa). Plaintiff Kjell Kristiansen initiated this ERISA action against his former employer, Dr. Feras Aldaoud, alleging that he and his wife mismanaged the company’s 401(k) plan and the funds Mr. Kristiansen invested in it. Mr. Kristiansen brings two causes of action in his complaint, a claim for breach of fiduciary duty and a claim for prohibited transactions. He argued that defendants invested his funds in a manner which contravened his directions, and that they used those funds for their own self-interest by directly accessing and using the plan assets. Defendants moved to strike certain allegations made by Mr. Kristiansen in his amended complaint. The court assessed the motion to strike under Federal Rule of Civil Procedure 12(f) and concluded that the challenged allegations in the amended complaint are not immaterial or impertinent and that “Defendants cannot use their Motion to Strike to advance evidentiary objections at this stage of litigation because the complaint sets forth allegations and is not yet weighed in terms of admissible evidence.” In addition, the court was unpersuaded that defendants would be prejudiced if their motion was not granted. Because the court concluded that defendants did not meet their burden to show that the allegations should be stricken under the circumstances provided by Rule 12(f), it denied the motion.
Adkins v. CSX Transp., No. 21-2051, __ F. 4th __, 2023 WL 4035811 (4th Cir. Jun. 16, 2023) (Before Circuit Judges Niemeyer, Agee, and Rushing). In this action, a group of 58 former employees of CSX Transportation, Inc., sued their former employer under ERISA, the Family Medical Leave Act, the Rehabilitation Act, and the West Virginia Human Rights Act, alleging that CSX discriminated and retaliated against them for seeking medical leave. The district court granted summary judgment to CSX on all claims. It concluded that CSX provided a legitimate nondiscriminatory reason for the terminations – suspected fraud based on the uncanny similarities in the particulars of all of the employees’ leave. In support of their belief that the employees were acting dishonestly, CSX pointed out a clear pattern discernable in the forms that the employees submitted. All of the employees were taking medical leave based on the exact same soft-tissue injury and all of their forms were signed by the same two chiropractors. This evidence proved persuasive to the district court. On appeal to the Fourth Circuit, the terminated employees fared no better. The court of appeals affirmed, agreeing that CSX was within its rights to terminate the plaintiffs “and that the plaintiffs failed to present evidence to create a genuine issue of material fact as to whether the reason was pretextual.” Additionally, the court of appeals held that plaintiffs did not present evidence that CSX interfered with their FMLA rights because the employer “honestly believed that the plaintiffs were seeking leave for an improper purpose.” Based on the foregoing, the court of appeals agreed with the district court that there was “ample evidence to raise legitimate suspicions of benefits abuse,” and therefore affirmed the holdings of the lower court.